Note 3 - Acquisition of Clear Com Media, Inc

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Business Combination Disclosure [Text Block]

NOTE 3 – ACQUISTION OF CLEAR COM MEDIA, INC.

As described in Note 1, CEN acquired CCM on July 9, 2021. The results of operations for CCM have been included in the accompanying consolidated financial statements from that date forward. The acquisition was made for the purpose of providing revenue to support CEN operations through the development, marketing and sales of certain digital products.  Additionally, CCM will provide in-house IT support functions for CEN activities.

The merger will be accounted for as a business combination using the acquisition method of accounting under the provisions of Accounting Standards Codification (ASC) 805, “Business Combinations” (ASC 805), with CEN representing the accounting acquirer under this guidance. ASC 805 requires, among other things, an assignment of the acquisition consideration transferred to the sellers for the tangible and intangible assets acquired and liabilities assumed, using the bottom-up approach, to estimate their value at acquisition date. Any excess of the fair value of the purchase consideration over these identified net assets is to be recorded as goodwill. Conversely, any excess of the fair value of the net assets acquired over the purchase consideration is recorded as a bargain purchase gain. Our estimates of fair value are based upon assumptions believed to be reasonable, yet are inherently uncertain and, as a result, may differ from actual performance. During the measurement period, not to exceed one year from the date of acquisition, we may record adjustments to the estimated fair values of the assets acquired and liabilities assumed with a corresponding adjustment to goodwill or bargain purchase gain, as appropriate, in the period in which such revised estimates are identified.

See Note 21 for segment reporting, which includes the specific revenue and earnings results of CCM since the date of acquisition as CCM has been determined to be a distinct operating segment.

The aggregate consideration for the acquisition of CCM was 4,000,000 restricted shares of CEN common stock, which were valued at $2,120,000 based upon the closing stock price on July 9, 2021. The purchase price accounting is still in process. The following is a preliminary estimate of the fair values of the assets acquired and the liabilities assumed by CEN in the transaction:

Cash	$	259,470
Accounts receivable		202,527
Property and equipment		97,911
Other assets		244,540
Identifiable intangibles		625,170
Current financial liabilities		(321,251	)
Other long-term liabilities		(140,078	)
Total identifiable net assets		968,289
Goodwill		1,151,711
Net assets acquired	$	2,120,000

Identified intangible assets acquired includes trade names, customer relationships, and product technology whose fair value of $625,170 is based on a provisional amount, pending receipt of additional appraisals. These assets are expected be amortized over useful-lives ranging from 3 to 7 years and will reviewed for impairment at least annually or more frequently if indicators of impairment exist.

Amounts recognized as goodwill are expected to be fully deductible for Canadian income tax purposes.

Costs related to the acquisition, which include legal, accounting, and valuation fees, in the amount of approximately $80,000 have been charged directly to operations and are included in general and administrative expenses in the 2021 consolidated statement of operations.

Supplemental proforma financial information

The unaudited financial information in the table below summarizes the combined results of operations of CEN and CCM on a pro forma basis, as though the companies had been combined as of the January 1, 2020. These pro forma results were based on estimates and assumptions, which we believe are reasonable. The pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2020. The pro forma financial information assumes the 4,000,000 shares of CEN common stock were issued on January 1, 2020 and includes adjustments to amortization for acquired intangible assets.

The pro forma financial information for the three and nine-months ended September 30, 2021 combines the results of CEN and CCM for the respective periods, which include the results of CCM subsequent to July 9, 2021, and the historical results for CCM for the period of July 1, 2021 to July 8, 2021 and the six-months ended June 30, 2021. The pro forma financial information for the three and nine months ended September 30, 2020 combines CEN’s historical results for those periods with the historical results of CCM for the three and nine months ended September 30, 2020.

The following table summarizes the pro forma financial information:

	Three-Months Ended						Nine-Months Ended
	September 30, 2021			September 30, 2020			September 30, 2021			September 30, 2020
Revenue	$	320,637		$	310,210		$	951,284		$	906,875
Operating expenses		943,803			1,249,508			18,412,579			3,032,209
Loss from operations		(623,166	)		(939,298	)		(17,461,295	)		(2,125,334	)
Other (expense) income		(73,670	)		(866,513	)		944,926			(2,492,515	)
Net income (loss)	$	(696,836	)	$	(1,825,511	)	$	(16,516,369	)	$	(4,617,849	)
Net Loss Per Share
Basic and Diluted	$	(0.01	)	$	(0.06	)	$	(0.40	)	$	(0.15	)
Weighted Average Number of Shares Outstanding
Basic and Diluted		49,412,822			31,334,031			41,394,326			31,172,985